Landlord Must Answer for Late Fee Policy

 Tenants in Palo Alto, California have filed a class action lawsuit against one of the nation’s largest landlords for what tenants say are unlawful and excessive fees.

The landlord owns or manages over 25,000 rental units throughout California. Lawyers for the tenants have called the fees predatory. The complaint alleges that these fees generate profit from tenants, something that’s not allowed under the law in many states, including California.

Tenants allege that the landlord’s late fee penalties, a flat fee of $50 to $100, even if the tenant pays rent only one day late, are excessive. In addition, the landlord has a practice of stacking late fees — charging another late fee if the previous one is not paid with the current month’s rent.

Tenants complain that they have no way of checking their fee balances and that the late fee policies are not fully disclosed. One tenant says she was not notified of a pending late fee until the balance had exceeded $350.

“Landlords are allowed to recoup reasonable costs associated with late rent, but are not allowed to profit from excessive late fees or stacking late fees,” explained Laura L. Ho, partner at Goldstein, Borgen, Dardarian & Ho, which represents the tenants. Megan Ryan, also with the Goldstein firm explains, “For over 100 years, the California Supreme Court and legislature have made clear that late fee penalties charged by landlords are usually unlawful because landlords are only entitled to simple interest of a few cents a day plus actual damages, if any.”

The lawsuit seeks an injunction against charging fees based on state law including California’s Unfair Competition Law and to pay back the late fees already charged.

This landlord  lost a federal court action in Massachusetts last week when a judge declared its application and “amenity” fees illegal.

American Apartment Owners Association offers discounts on products and services for all your property management needs. Find out more at